The Untold Growth Stories Behind the US’s Biggest Brands
Popularised by CNBC “Mad Money” show host Jim Cramer, the terms ‘magnificent seven’, ‘MAMAAs’, or ‘FANGs’ are used in the financial space to describe a specific basket of innovative US tech giants – companies such as Facebook (now Meta), Apple, Amazon, Microsoft, Google, and other rising stars like Nvidia and Tesla.
Most of these stocks require little to no introduction. Chances are you already own an iPhone made by Apple, have a Facebook account with Meta, and watched the latest season of ‘Stranger Things’ on Netflix, which you searched for on Google. These companies are intertwined with every aspect of our lives, dominating a diverse range of industries from streaming and advertisement to consumer electronics and electric vehicles. Given most investors are likely familiar with the names in the FANG+ Index, instead of telling their already well-known origin stories, Global X has broken down the lesser-known parts of their business which should drive their ongoing growth. Today we cover three giants spanning consumer electronics, packaged software, and e-commerce: Apple, Microsoft, and Amazon.
Apple: An ‘Apple’ a Day Keeps the Doctor Away
Since the release of the Apple watch in 2015, Apple has pursued a position at the forefront of the wearable health monitoring industry with its ECG (electrical heart mapping) and heart arrhythmia detection. Seven years later, Apple has reached yet another major milestone in its ambitions, announcing proof-of-concept in their development of continuous and non-invasive blood glucose monitoring through the Apple watch – a project that could be life-changing for the 422 million patients worldwide who suffer from diabetes.1
Ever since the release of Dextrometer in 1980, fingersticks (self-administered blood tests) have been the standard for glucose monitoring in patients.2 Newer technologies such as continuous glucose monitoring (CGMs) have since been developed, however they require implants and weekly or monthly replacements.3 Apple’s non-invasive technology that utilises silicon photonics chips and optical absorption spectroscopy to detect glucose could be a breakthrough that overturns a multi-billion-dollar industry, cementing the business as an unexpected powerhouse in healthcare.4
Microsoft: All Work, All Play
Microsoft is a goliath in personal computing, productivity, and cloud services – words which most would relate to a day at work. But away from the workplace, Microsoft is also the second largest gaming company in the world by revenue. Driven by their flagship gaming console, the Xbox series, Microsoft has published hundreds of gaming titles and become a staple in the gaming community since its launch in 2001. Their gaming department ‘Xbox Game Studios’ with its 23 independent game developers, is one of the biggest institutes in gaming.5
Microsoft’s next iteration of gaming growth should come from its upcoming acquisition of Activision Blizzard, a gaming giant in their own right. The US$69 billion contract, which has passed through US anti-trust and is on its way to UK approval, will be the biggest deal in gaming history.6 To put the acquisition in perspective, Sony, the current global leader in gaming and entertainment (by revenue), has a total market cap of ~US$103 billion, less than 1.5x the valuation of Activision Blizzard.7 In the wake of this landscape-defining deal, Microsoft looks more and more likely to become the number one gaming distributor in the near future.
Amazon: More Than Just a Shopfront
For the everyday retailer, Amazon is mostly known for its expansive e-commerce shopfront and streaming services. However, the real money maker for Amazon is actually its Amazon Web Services (AWS), a cloud computing, data storage and delivery service.
AWS was launched in 2008 as a supporting infrastructure for Amazon’s main e-commerce business, but after its successful global roll-out, it was quickly made available to other businesses as a way to build scalable applications reliably and securely on the cloud. Since then, AWS has grown rapidly into Amazon’s most profitable business division. In fact, in 2022, AWS accounted for the entirety of Amazon’s annual operating income, generating US$22.8 billion in profit compared to US$10.6 billion in accumulated losses from their other business segments.8
Of the big three cloud providers used by businesses globally (Amazon’s AWS, Microsoft’s Azure, and Google’s GCP), AWS is the oldest, most popular, and often considered the best-developed, making Amazon not just a leader in e-commerce, but the leader in online infrastructure as well.9 Looking forward, analysts expect AWS to maintain its dominant position in cloud computing, and continue to grow despite shaky economic conditions.
FANG: For investors interested in companies at the leading edge of next-generation technology, including both household names and newcomers, the Global X FANG+ ETF (ASX: FANG) offers a solution. Gain exposure to the biggest names of the US market across multiple industries and sectors.
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